Student Loan Borrowers Face Wage Garnishment Amid Rising Financial Strains

For many Americans burdened by student debt, the looming threat of wage garnishment is adding stress to already tight budgets.

Jason Collier, a special education teacher in Virginia, knows this struggle well. At 46, he often has to wait until payday just to fill his car’s gas tank. Now, with the U.S. Department of Education set to resume garnishing wages for those behind on federal student loans, Collier fears up to 15% of his paycheck could be withheld.

“Money is tight when you’re a teacher,” Collier said. Balancing student loan payments with raising two children and medical bills from a cancer diagnosis has been a constant challenge. “If my paycheck gets garnished, it’ll be even harder to cover unexpected expenses like car repairs.”

After a five-year pause during which federal student loan collections were largely suspended, the Department of Education announced on April 21 that it will resume aggressive collection efforts, including garnishing wages, federal tax refunds, and Social Security benefits from borrowers in default.

Currently, more than 5 million borrowers are in default, and that number could double to 10 million in the coming months, according to the Education Department.

This shift marks a stark contrast from the Biden administration’s focus on pandemic-related relief and flexible repayment plans aimed at helping struggling borrowers catch up.

Education Secretary Linda McMahon emphasized the importance of repayment in a video posted on X, stating, “Borrowers should pay back the debts they take on.”

U.S. Secretary of Education Linda McMahon attends the International Women of Courage Awards at the State Department.

Widespread Impact on Borrowers

With over 42 million Americans holding student loans totaling more than $1.6 trillion, the impact of these collections will be far-reaching. Federal rules allow the government to garnish up to 15% of disposable income and federal benefits, as well as seize entire federal tax refunds from borrowers in default.

Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program, warned, “In today’s high cost-of-living environment, this kind of withholding can force people to choose between essential expenses.”

Many borrowers, like retired healthcare worker Marceline Paul, feel caught in an impossible situation. Now 68, Paul relies almost entirely on a monthly Social Security check of about $2,600. If garnished, she will lose critical funds needed to maintain her home and travel to visit family in Trinidad.

“When I saw the notice, it made me sick to my stomach,” Paul said. “I’ve paid into the system and should be able to retire without this burden.”

According to the Consumer Financial Protection Bureau, over 450,000 borrowers aged 62 and older in default could see reductions in their Social Security benefits.

Chaos and Confusion Amid Collection Resumption

The restart of collection efforts comes at a tumultuous time. The Education Department’s workforce has been cut in half, including many staffers who helped borrowers navigate repayment options.

Many borrowers now face long wait times and conflicting information when trying to resolve their loans. Kia Brown, a management analyst at the Department of Veterans Affairs, said she’s struggled to even find out who services her loans or what her new payments will be following the blocking of the Biden administration’s SAVE repayment plan.

“I’ve been on hold for hours, and no one can give me clear answers,” Brown said. “People aren’t dodging payments — many of us just don’t know how to repay with so little guidance.”

With wages potentially garnished, Brown worries about the financial hardship it will bring to her family living paycheck to paycheck.